This blog is written by Mr. Nauman Ul Qadeer, Senior Manager Consulting and Financial Advisory Services. Please read this blog and provide your valued comments.

PREVENTION OF OFFENCES RELATING TO FRAUD, MONEY LAUNDERING AND TERRORIST FINANCING

The changing trends and pattern of Money laundering (ML) and Terrorist Financing (TF) is a major global concern now days. Money laundering in simple words is method to make funds as earned from legal resources whereas actually being earned from criminal activities. Whereas in financing of terrorism, funds may come from legal resources but will be used for criminal activities. Government of Pakistan is actively making polices and legislations in light of the recommendation of the FATF.

Section 453 of the Companies Act 2017, which requires every officer of a company to endeavor to prevent commission of any fraud, offences of money laundering including predicated offences as provided in the Anti-Money Laundering Act, 2010 (VII of 2010) with respect to affairs of the company and necessary adequate measures need to be taken. Further FATF Recommendations also require countries to take measures to counter Money Laundering and Terrorism Financing Activities. Such policies will be developed considering Risk-Based Approach, which require High Allocation of Resources / Enhanced measures will be taken for High Risks and Simplified Procedures will be taken for Low Risks areas. Risks related to Money Laundering and Terrorism Financing can be classified in three categories: –

  • Geographic Risk
  • Client Risk
  • Service Risk

Categorization of above risks as “High” or ‘Low” depends on number of factors like do our business activities relate with the parties / customers based in countries, that are known to be used by money launderers and or terrorist financers or they have connections, direct or indirect, with money launderers or terrorist financers.

Accordingly, Securities and Exchange Commission of Pakistan (SECP) issued Circular # 16 of 2018 dated August 29, 2018 to take reasonable measure, for identification of ultimate natural beneficial owners or controllers, irrespective of the number of levels of the chain of ownership or control, from companies having legal person (non-natural person) as members or shareholders and are required to maintain “Register of Ultimate Beneficial Ownership”. The minimum information of ultimate beneficial owner, that is required to be maintained in the register includes:

1)         Full name,

2)         Father’s name/husband name,

3)         NIC/NICOP/Passport number,

4)         Nationality,

5)         Country of origin (in case of foreign national or dual national),

6)         Email address (if available),

7)         Usual residential address,

8)         Date on which name was entered in the register, and

9)         Date on which the person ceased to be a beneficial owner along-with reasons of cessation.

In exceptional cases where no natural persons are identified, there shall be entered in the register the names of the natural person(s) who hold the position of senior managing official(s) of the legal person (including their date of birth, NIC/NICOP/Passport number, nationality and residential addresses).

Timeline to obtain and maintain register under this is ninety days from the date of the circular, and 30days for any subsequent change. Further The Commission may require said maintained information from the company or class of companies and shall also provide this information to the any other authority or agency of the Government pursuant to the powers to call for information entrusted by law to such authority or agency. Further each company shall authorize its chief executive officer or one of its directors to provide the requisite information to the concerned authorities, and provide further assistance as may be needed.

Nauman Ul Qadeer